There is no doubt about it, new cars are exciting. They look good, they shine, they have that new car smell, and they have all the modern bells and whistles. There are certainly many wealthy people who do not have to be too concerned about new vehicles and other expensive toys. But for the average family, a high-interest car loan can wreak havoc on the budget.
In many homes, it is not just one expensive car loan, there are two that have to be paid down. Having costly burdens for several years can dig deep into money that could be better used for savings.
Three Reasons New Cars Can Harm Your Personal Finances
If you are struggling to keep up with your bills or facing overwhelming debt that is preventing you from being able to save money, you would not be alone. In 2017, there were 767,721 non-business bankruptcies filed in the United States according to the Administrative Office of the U.S. Courts.
There are several reasons why a person finds themselves in a bankruptcy situation. The most common reasons cited for filing bankruptcy are:
- Expansive and costly bills to pay for medical treatment.
- Job loss.
- Too much credit debt.
- Dealing with divorce.
- Other unexpected expenses.
Looking at ways to set aside more money will be beneficial to your financial health over the long term. One area to consider is the automobiles you buy. If you can avoid having a multi-year, monthly payment to pay off a car loan, you can keep more money in your pocket.
When a car has to be financed, the final sum of money that a person ends up paying is far more than what the car is worth. If you can understand the parts of your life that are draining your funds and why they are doing it, you can better determine how you can build wealth.
At the end of the day, a car just needs to get you from point A to point B. Consider the following three reasons why a new car could be harming your financial goals:
- The minute you drive your new car off of the lot it starts to lose its value. The depreciation is swift, happening much more quickly than it will take you to pay off your loan.
- You will have to invest money in repairs at some point that will be on top of the car’s monthly payment. Typically, a repair tends to be unexpected. If you do not have the cash on hand to pay for it, you are likely going to have to add it to your existing credit card debt. Not to mention, you must also pay for the regular upkeep of your car so that it is in good condition and will work for you.
- Financing may make buying a car a reality but depending on what you can afford to pay each month, long loan terms keep you on the hook for payment while the financial institution gets rich off your money. If you know you need a car, waiting until you can save enough to pay for it in cash is the way to go.
Speak With an Indiana Bankruptcy Attorney Today
If you live in or near Danville, IN and you are having a difficult time handling your debt, call Christopher L. Arrington at (317) 745-4494. Christopher L. Arrington is a Danville bankruptcy attorney who can help you figure out the best way to manage your situation.